What To Do When You Can’t Pay Your Taxes

The end of tax season is approaching—April 17, 2018, to be exact. While the 2-day extension from the typical deadline may come as a relief to some, many Americans face the reality of being unable to pay back their taxes in full each year. Not paying your taxes on time can have a number of serious consequences that includes financial penalties, wage garnishment, and property seizure.

At The Gartzman Law Firm, we see many clients who have either filed their tax returns and find themselves unable to pay their taxes, or who have decided not to file their tax returns at all due to being unable to pay back any money owed. Our team of expert attorneys will help you navigate your personal situation and do what we can to ensure your financial security this tax season.

Even If You Can’t Pay Your Taxes, File Them Anyways

While the thought of filing unpayable taxes seems daunting, the penalties of not filing altogether are far greater than being unable to pay them once they are filed; in fact, the IRS estimates that the failure-to-file penalty is 10 times greater than the failure-to-pay penalty.

The failure-to-file penalty is normally five percent of the unpaid taxes for each month or part of a month that a tax return is late, and will not exceed 25 percent of your unpaid taxes.

The failure-to-pay penalty is generally 5 percent per month or part of a month your taxes remain unpaid. It begins accruing the day after taxes are due, and can build up as much as 25 percent of your unpaid taxes.

If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.

If you opt not to file your taxes on time, or at all, you may be putting yourself at a severe financial disadvantage. Fortunately, options exist for eligible parties that may greatly reduce or eliminate the amount of tax money owed to the IRS. The Gartzman Law Firm is dedicated to fully exploring these options with you, and we have outlined common solutions to not being able to pay back taxes by the deadline below.

Creating an Installment Agreement

One of the most straightforward ways to ensure that taxes are paid within the three year statute of limitations—thus ensuring that you are eligible to receive a refund—is to draft an installment agreement.

In simple terms, an installment agreement is a payment plan based on your income, expenses, liability and circumstances. From this information, we can determine if an installment agreement is a viable option for you, and if so, a monthly payment amount can be negotiated to help you pay off your tax debt.

Offer in Compromise (OIC)

Should an installment agreement be out of the question, reaching an Offer in Compromise (OIC) is another potential solution to paying back taxes. This “agreement” between a taxpayer and the IRS will settle the taxpayer’s tax liabilities for less than the full amount owed.

Unfortunately, the IRS does not generally accept offers if it believes that the liability can be paid in full as a lump sum or through an installment agreement. This is why securing the aid of a seasoned tax lawyer is critical in being able to reach an Offer in Compromise.

Full Payment Agreement

If you are able to make a full payment, but cannot by the tax deadline for some reason, you may qualify for up to 120 additional days to pay your taxes in full. While there is no fee for a full payment agreement, interest and any applicable penalties will continue to accrue until your tax debt is repaid.

In the instance that a full payment agreement is sought out, one thing to consider is that taking out a loan or using a credit line to repay the lump sum your debt may result in a lower interest rate than if left to accrue interest with the IRS. Use caution, however, as you may still end up with an unpayable debt should this option be taken.

Appealing to the IRS

By law, the IRS must be held accountable for any action that it, as an organization, undertakes. This includes any attempt made to collect an outstanding tax debt in error. If you believe that the IRS has made an error in matters such as overcharging, unnecessary audits or property seizures, you may be eligible to appeal to the IRS in order to have the matter resolved, and to also have any outstanding balances reduced or forgiven.

Contact Us

We know that paying back debt to the IRS could put an immense financial burden on you and your family this tax season. Fortunately, options do exist—and The Gartzman Law Firm is here to help.

If you are struggling to pay your taxes back on time, contact us today for a free initial consultation.